Capital gains tax framework completely overhauled: Changes that can hurt you

Capital gains tax framework completely overhauled: Changes that can hurt you

The Union Budget 2024-25 has completely overhauled the capital gains tax framework. Some measures may hurt badly. Homeowners will no longer get the indexation benefit on sale of property, while gains on sale of stocks and equity funds will now attract a higher tax. However, the Budget offers some sops as well. The exemption limit on gains from equities has been hiked, while a previous anomaly in taxation of certain non-equity funds has been removed. Let’s dive deeper to find out what this means for you.



The gamechanger is the elimination of indexation benefit from the capital gains taxation framework. This has been accompanied by a cut in long-term capital gains (LTCG) tax rate from 20% to 12.5%. This will have an impact on property owners, as well as gold buyers, in varying degrees. Indexation offsets accrued capital gains against inflation rate during the holding period, which lowers the effective tax incidence in many cases. This offset benefit has been removed by the Budget, so the entire gains will be taxed, but at a lower rate of 12.5%, instead of 20% earlier. The Finance Ministry has clarified that assets bought before 1 April 2001 will continue to get the indexation benefit.

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